Cloud Peak Energy Inc. – One of Nation’s Largest Coal Producer Files Chapter 11, Lines Up DIP Financing and Bondholder Support in Advance of Planned Sale Process

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May 10, 2019 − Cloud Peak Energy and 27 affiliated Debtors (OTC:CLDP, "Cloud Peak" or the "Debtors") filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 19-11047. The Company, one of the largest U.S. coal producers, is represented by Daniel J. DeFranceschi of Richards Layton & Finger. Further board-authorized engagements include (i) Vinson & Elkins as general bankruptcy counsel, (ii) Centerview Partners as investment banker, (iii) FTI Consulting as financial advisor and (iv) Prime Clerk as claims agent.

The Company’s petition notes between 1,000 and 5,000 creditors, estimated assets of $928.7mn and estimated liabilities of $635.0mn. Documents filed with the Court list the Company's three largest unsecured creditors as (i) Wilmington Trust, National Association (trustee in respect of $56.4mn of 2024 Bonds), (ii) (i) BNSF ($8.1mn transportation claim) and (iii) Nelson Brothers Mining Services ($4.3mn trade claim).

In a press release announcing the filing, Cloud Peak advised that “In conjunction with the filing, and subject to court approval, Cloud Peak Energy has received a commitment for approximately $35 million in debtor-in-possession ('DIP') financing from certain of the Company’s prepetition secured noteholders. The Company expects $10 million of the total DIP financing will be available on an interim basis. The DIP financing, combined with the Company’s cash on hand and funds generated from ongoing operations, are expected to provide sufficient liquidity for the Company to continue operating in the ordinary course during the sale process.

The Company also announced that it has entered into an Amended and Restated Sale and Plan Support Agreement (the 'Support Agreement') with holders of approximately 62% in dollar amount of the Company’s secured notes due 2021 (the '2021 Notes') and more than 50% in dollar amount of the Company’s unsecured notes due 2024. The Support Agreement reflects, among other things, the support from two of the Company’s key creditor constituencies for the Company’s sale process, as well as the consent of the holders of the 2021 Notes to the Company’s use of cash collateral and priming liens to allow for the DIP financing."

Colin Marshall, the Debtors' President and Chief Executive Officer, commented, “Over the past several months, Cloud Peak Energy has thoroughly evaluated strategic alternatives to address the challenging market conditions in our industry. We believe, at this time, that a sale process in Chapter 11 will provide the best opportunity to maximize value for Cloud Peak Energy.”

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Hill Declaration”), Heath A. Hill, Cloud Peak's Executive Vice President and Chief Financial Officer, detailed the events leading to the Debtors' Chapter 11 filing. The Hill declaration states, "The Company actively deployed a number of strategies and transactions prepetition in an effort to deleverage its balance sheet, bolster liquidity, and maximize value for stakeholders. The Company’s chapter 11 filing, however, was precipitated by (i) general distress affecting the domestic U.S. thermal coal industry that produced a sustained low price environment that could not support profit margins to allow the Company to satisfy its funded debt obligations; (ii) export market price volatility that caused decreased demand from the Company’s customers in Asia; (iii) particularly challenging weather conditions in the second quarter of 2018 that caused spoil failure and significant delays in coal production through the remainder of 2018 and into 2019, which reduced cash inflows from coal sales and limited credit availability; and (iv) recent flooding in the Midwestern United States that has significantly disrupted rail service, further reducing coal sales."

About Cloud Peak

Cloud Peak Energy Inc. (OTC:CLDP) is headquartered in Wyoming and is one of the largest U.S. coal producers (supplying approximately 2% of the U.S. electricity demand) and the only pure-play Powder River Basin (PRB) coal company. As one of the safest coal producers in the nation, Cloud Peak Energy mines low sulfur, subbituminous coal and provides logistics supply services. The Company owns and operates three surface coal mines in the PRB, the lowest cost major coal producing region in the nation. The Antelope and Cordero Rojo mines are located in Wyoming and the Spring Creek Mine is located in Montana. In 2018, Cloud Peak Energy sold approximately 50 million tons from its three mines to customers located throughout the U.S. and around the world. Cloud Peak Energy also owns rights to substantial undeveloped coal and complementary surface assets in the Northern PRB, further building the Company’s long-term position to serve Asian export and domestic customers.

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